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When the Real Estate Game Cost $9.95

Carleton Sheets was a staple of late-night TV, encouraging viewers to go into debt investing in real estate. Since the market soured, he has had a lower profile.Credit
Photo illustration by The New York Times

IN the alternate universe of late-night TV infomercials, Carleton H. Sheets once reigned supreme. Standing against a backdrop of tropical seas and gently swaying palm trees, he promised that viewers, no matter how down on their luck, could soar into the ranks of the super-rich by investing in that most bubblicious of assets: real estate.

“Even if you have no money, no credit and no experience in real estate,” you, too, could achieve financial freedom, he advised in a sonorous baritone that, after mesmerizing insomniacs for several years, gained even greater purchase with viewers during the recent housing boom.

All you needed was Mr. Sheets’s real estate course, available for the low, low price of $9.95. Only five minutes left for this trial offer. Call now. “Why not make this the moment you stop dreaming?” he intoned.

The dream that Mr. Sheets dangled in front of average Joes and Janes was a hand in the game, a piece of the action. When property values began soaring in the late 1990s, so did the frequency of Mr. Sheets’s infomercials. For millions of real estate wannabes sitting in their living rooms, he embodied the bubble as much as Citigroup or Merrill Lynch did.

Today, Mr. Sheets presides over some holdings of his own that appear to be troubled, his late-night profile has greatly dimmed, and the world that he so avidly promoted — easy real estate riches — is in shambles.

Even so, he retains a loyal flock of true believers.

“If you write the truth about Carleton Sheets, you’ll make a lot of people mad,” says David L. Hancock of Burlington, N.C., a Sheets devotee who credits his mentor’s training course for his start in real estate investing.

“The truth is, some people take the information and use it and some people are simply lazy,” says Mr. Hancock, who has also appeared in Mr. Sheets’s infomercials. “It’s just like any diet or exercise book out there. They probably work, but how many people are willing to stick to them?”

Some people say it’s a little more complicated than that.

“These guys all said, ‘I’m going to teach you how to get rich in real estate, even if you have no cash, no credit, no common sense, are unwilling to make any effort or take any risk.’ That’s literally their pitch,” says John T. Reed, who has written books about real estate investing and rates real estate gurus on his Web site, www.johntreed.com.

On his site, Mr. Reed has made a sport of ripping apart Mr. Sheets’s advice and techniques.

“Sheets targets beginners. The curriculum he devised for those novices is not what I think beginners need to know,” he writes on his site. “In fact, it appears to me that the topics he chose to write about were selected to maximize Carleton Sheets’ income, not to increase the incomes of his customers. The customers that most real estate gurus go after are relatively uneducated, inexperienced and poor.”

Mr. Sheets, after a brief telephone conversation from his home in Stuart, Fla., declined to be interviewed. “I’m proud of the life that I’ve led and what I’ve helped accomplish for a lot of people,” he says. “I keep telling people that I gave them the cloth but they were the ones who made the clothes.”

The Professional Education Institute, the Burr Ridge, Ill., company that is Mr. Sheets’s longtime partner, says its offerings have always provided value.

“P.E.I. and Carleton Sheets have received thousands of letters from satisfied customers praising Carleton Sheets’s programs. Last year alone, we received over 3,000 such letters,” the company said in a statement. “All P.E.I./Carleton Sheets products/programs meet the highest standards to ensure they provide tangible benefits to their students.”

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David L. Hancock, who owns several apartment complexes in the Burlington, N.C., area, says he has followed Carleton Sheetss approach and is a believer.Credit
Jeremy M. Lange for The New York Times

Nor, says P.E.I., is it significant that portions of Mr. Sheets’s personal portfolio may be distressed.

“It is neither surprising nor noteworthy that some of the properties owned or partially owned by Carleton Sheets may have, at least temporarily, lost some value,” the company says. “Nearly every property owner in the U.S. today has experienced at least some — if not significant — depreciation in property values.”

And it may be that Mr. Sheets, who titled his 1998 book “The World’s Greatest Wealth Builder,” remains a true believer — as he was in early 2007, when, at the peak of the housing boom, he offered wisdom to real estate novices.

“I’ve been a successful real estate investor for 35 years,” he said in an infomercial that was shown that year. “History shows real estate is the most stable and consistently profitable investment people can make.”

INFOMERCIAL-LAND has always been populated by colorful characters, who pitched real estate techniques while wearing Technicolor shirts or, offered nuggets of advice while posing on yachts, surrounded by bikini-clad women.

Mr. Sheets, 69, entered the business more quietly. Having grown up in Delaware, Ohio — his father worked for Procter & Gamble — he marketed soft-drink bottle caps in one of his early jobs, and was later director of marketing for a Florida company that was a major processor of orange juice.

In the 1970s, he started investing in property, and in the early 1980s he slogged away as a pitchman for a company that represented the real estate authority Robert G. Allen, an early advocate of the “no-money-down” path to financial success. (There are different definitions of no-money-down strategies, but they all involve someone borrowing money — from a bank or a partner — rather than using his own funds to purchase a property.)

A few decades ago, before late-night cable infomercials burst onto the scene, real estate experts ran seminars early in the morning and at night so that aspiring millionaires could attend before or after their day jobs. The opportunity to sign up for more seminars was offered at tables in the back of the room, and Mr. Sheets proved to be an avid and dedicated seminar leader.

“We traveled 47 weeks of the year,” recalls Mr. Sheets’s third wife, Sue Blair. (Mr. Sheets is now married to his fifth wife.) “We would go in and do a 90-minute talk, a 90-minute preview, where we taught investors two or three techniques out of like 40. It was a teaser session to get them to sign up for more seminars.”

Ms. Blair says Mr. Sheets was broke when she first met him and had taken up teaching real estate courses in Miami after losses on Florida property investments. Things were so bad, Ms. Blair says, that she had to lend Mr. Sheets $500 for a mortgage payment.

All of that changed in the early 1980s, when two businessmen from Chicago — Mark S. Holecek and Donald R. Strumillo — were on the lookout for a real-estate pitchman to help market products. They teamed up with Mr. Sheets, and their venture, eventually named the Professional Education Institute, grew at a decent clip, according to Ms. Blair.

But when property values began to climb in the mid- to late 1990s, demand for Mr. Sheets’s investment programs soared. And he and his partners had found the perfect avenue for courting the masses, one more potent than road shows and seminars: television.

Mr. Sheets’s backers spent an estimated $280 million running ads on cable and network television between 1993 and 2007, according to Infomercial Monitoring Service, and his infomercials were among the most frequently shown of all infomercials during the frenzied real estate boom. The industry rule of thumb is to bring in at least twice in revenue what you spend on advertising.

P.E.I., which is privately held, raked in cash. In the three years ended in August 2005, the company’s revenue totaled at least $441.3 million, according to data P.E.I. provided to the research firm Gnames Media Group. The firm said that was its most recent data available because it stopped working with P.E.I. in early 2007.

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John T. Reed rates real estate gurus on his Web site and has criticized Mr. Sheetss infomercials and curriculum.Credit
Peter DaSilva for The New York Times

P.E.I. had commissioned sales representatives working from a Salt Lake City call center to encourage people who had already bought DVDs to cough up an additional $995 to $5,000 for phone sessions with a real estate coach.

In theory, these coaches had years of experience buying and selling properties. In practice, according to a former employee, that wasn’t always the case.

“When things got really busy during the boom, I’m sure there were people hired that were not the company’s ideal candidates,” said that former employee, Bill Cox, who worked as a real estate coach for Mr. Sheets from 2004 to 2006 and says he personally does have years of real estate investment experience. “One of the criteria was that you had to have made at least one real estate purchase. That could have been their own home. That was O.K. because many of the students were first-time home buyers themselves.”

A spokeswoman for P.E.I. said that the coaches have, on average, 15 years’ experience in real estate and that they must complete 100 hours of training each year.

When Mr. Sheets signed on with Mr. Holecek and Mr. Strumillo, he received a fairly small stake in their company, maybe as little as 10 percent initially, Ms. Blair recalls. And in the infomercial world — filled with sizzle and va-va-voom sex appeal — Mr. Sheets, who came across in demeanor as a Mr. Rogers of real estate, was an unlikely star.

Tall and slightly paunchy, Mr. Sheets typically appeared on air wearing button-down shirts (often checkered), sweaters and khaki pants. He would furrow his brows and nod sagely as he interacted with others on his infomercials, an Everyman who generously courted his viewers.

“He’s a fatherly-looking type,” says Cliff Rose, who worked at P.E.I. in the early 1990s. An infomercial producer, Timothy R. Hawthorne, puts his finger on part of the Sheets mojo: “He was kind of like someone’s favorite uncle.”

Like nearly all gurus, Mr. Sheets embroidered his infomercials with the requisite rags-to-riches tale. In one installment, as black-and-white photographs of a young Mr. Sheets flit by on the screen, he describes in a voiceover how he was fired from his Florida marketing job in the 1970s. With no money, no credit and a young family to support, he started investing in real estate. Today — ta-da! — he is a success.

That tale ended, the screen fills with attractive individuals and couples who say they were scraping by but now, thanks to Mr. Sheets, are making money hand over fist. It’s easy. If we can do it, so can you! For some, Mr. Sheets’s inspirational and motivational message became a ticket to a better life.

“I saw him on TV one Sunday morning,” recalls Mr. Hancock, who was working in newspaper advertising sales at the time. “I had seen his commercials before, but this time I ordered the program, some CDs and a manual. I was interested in the financial freedom that real estate could afford.”

Soon, Mr. Hancock was hooked. Using some of the techniques he says he learned from Mr. Sheets’s course, he bought his first property in 1996. Today, he says he owns all or part of about $25 million worth of property, much of which he bought during the real estate bubble. Which means Mr. Hancock is in debt up to his eyeballs.

“When I say I have $25 million worth of property, I’m $21 million in debt,” he says, adding that rental rates are holding up O.K. “Do I ever sleep uneasy? No, actually, I don’t.”

Mr. Sheets’s programs are geared toward novices, but his advice sometimes veers into very sophisticated territory. (One DVD spends 11 minutes explaining cash flow analysis.) Other suggestions and information are so basic they come across as almost comical.

In his book, Mr. Sheets offers negotiation techniques (“teach yourself to ask for and remember the other party’s name”); discussions of mortgages and how to use leverage (“leverage is the very nucleus of creating wealth out of thin air”); as well as definitions of real estate terms (“puffery: exaggerated praise of a product or property”).

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The Carleton Sheets empire includes books and DVDs and at one point offered real estate investment coaching by phone for $995 to $5,000.Credit
Tony Cenicola/The New York Times

His students were obviously willing to leap into the frenzied real estate market, but some were likely to have found themselves in way over their heads.

“In one of the exercises I would do with students, I’d say, ‘Show me that you know how to use the financial calculator and calculate mortgage payments,’ ” recalls Mr. Cox. “With some people, it was like, boom, they could do it. With others, I’d spend 30 minutes with them, telling them how to, like, push the buttons. You would feel bad for those people.”

AFTER agreeing to meet for an interview, Mr. Sheets called a few days later and rescinded the offer.

“I don’t want to subject myself to a highly critical article,” he said. “I feel good about my reputation.” He later mailed an autographed copy of his book. (“You’re a great writer and sound like a very nice person! All the best! Carleton.”)

Most of his partners aren’t eager to chat, either. When Russell J. Knowles of Port St. Lucie, Fla., who runs a medical equipment service company, was asked how he met Mr. Sheets, with whom he has invested in commercial property in Florida, he responded: “I’ve known him a long time. He’s a great guy. You keep pounding the pavement and you’ll get that story.” Then he hung up.

A call to Mr. Holecek of the Professional Education Institute went unreturned. A spokesman said he declined to be interviewed.

“You won’t hear from them,” predicts Mr. Reed, the guru-rating author. “People have been complaining about the firm for years — how they signed up for a $9.95 offer and somehow their credit card got charged $36 a month.”

The Better Business Bureau has reported hundreds of complaints like those over the years from customers of Mr. Sheets and P.E.I., many of them contending that they were overbilled and had difficulties securing refunds. A few state attorney general offices say they have received a handful of similar complaints over the years.

A spokesman for Mr. Sheets and P.E.I. says that only a tiny proportion of its customers — an average of 9 out of every 10,000 — filed complaints with the bureau or authorities over the years. “Virtually 100 percent” of the cases were successfully resolved, he added.

APPARENTLY a more nagging problem for Mr. Sheets is that he, too, seems to have been caught in the real estate implosion. In the late 1990s, Mr. Sheets and a partner, Michael Maslak, began buying numerous condos and duplexes in and around Stuart, the Florida city where Mr. Sheets has a home in a luxurious gated community.

But the homes that the partnership bought during the real estate frenzy were considerably more down-market than Mr. Sheets’s own, according to county property records and interviews. The homes have declined in value in the real estate downturn, causing Mr. Sheets to lose “a considerable amount of money” in the partnership, according to his spokesman.

Mr. Maslak said that the partnership with Mr. Sheets was being dissolved, but he declined to speak about losses it had sustained on several properties it holds.

When the days of easy money in the real estate market disappeared sometime last year, so, essentially, did Mr. Sheets. His once-ubiquitous infomercials stopped running, according to Infomercial Monitoring Service, and Mr. Sheets now maintains a much lower profile on his Web site.

Still, he says that now is a great time for individuals to invest in real estate. In a recent videocast on his Web site, he suggests that lawmakers should extend tax credits for first-time homebuyers to real estate investors, “encouraging them to become more active in the market again.” (In another, he advises viewers to make property offers in “uneven numbers to make the seller feel like you’ve really done a lot of work.”)

But with some real estate investors being blamed as having played a significant role in the housing boom and bust, it’s going to be a little harder for Mr. Sheets to woo new students.

“The infomercials are off the air completely now, and that’s strictly due to the times,” says Mike Summey, author of the “Weekend Millionaire” book series and a longtime friend of Mr. Sheets. “Real estate has been tarnished so badly in the press and so many people have lost their shirts out there buying stupidly, it just doesn’t have the luster to it that it once did.”

Correction: April 26, 2009

A picture caption last Sunday with an article about Carleton H. Sheets, best known for real estate courses that were sold through infomercials, misstated the given name of a real estate investor who follows his advice. He is David L. Hancock, not Davis.